New Scores Could Qualify Many More: Special Real Estate Report

New Scores Could Qualify Many More: Special Real Estate Report

New Scores Could Qualify Many More: Special Real Estate Report

McLean Mortgage

New Scoring Models

The housing market could be on the verge of a shake-up, as well-established credit scoring requirements are being reevaluated by the Federal Housing Finance Agency (FHFA), potentially opening up the mortgage market to a greater number of aspiring homeowners. The FHFA is contemplating whether to change a longstanding requirement for lenders to assess potential buyers using FICO scores, which some believe limit the pool of applicants because they are dated and conservative.

The agency announced on Dec. 20 that it was seeking feedback from industry stakeholders regarding competition and operational concerns related to the scoring process. The National Association of Realtors (NAR) said altering the model could help Americans that have traditionally struggled with homeownership prospects. “The National Association of Realtors is a strong supporter of utilizing newer, more predictive and inclusive scoring models, which we believe will responsibly expand access to housing credit and homeownership opportunities to more hardworking Americans, especially first-time borrowers and those who lack access to traditional forms of credit because of ‘thin’ credit files,” NAR President Elizabeth Mendenhall said in a statement to FOX Business.

The FICO model was adopted many years ago, but now the FHFA is asking lenders whether it would be advantageous to open the playing field to other, potentially more modern scoring models. The scores the FHFA is currently assessing include Classic FICO (current model), FICO 9 and VantageScore 3.0. Jeff Richardson, the vice president of marketing and communications at VantageScore, says that VantageScore can score more people than FICO. Of the 7.6 million consumers with credit scores at or above 620 who would be eligible for a home loan, Richardson explained that some have been credit inactive for a while by choice, which could render them un-scoreable by FICO. “We score those people. We look deeper into their credit file,” Richardson said. VantageScore has said it can score about 30 million more people than FICO.